Bush Orders Federal Contractors to Electronically Verify Working Status

President Bush has amended Executive Order 12989 directing all federal departments and agencies to require federal government contractors to use an electronic employment eligibility verification system to verify the employment eligibility of individuals hired during the contract period and individuals assigned to perform federal contract work within the United States.  The new requirement will apply to and be a condition of each future federal contract.

In response to the Executive Order, Department of Homeland Secretary (DHS) Michael Chertoff has designated E-Verify as the required electronic employment eligibility verification system.  E-Verify is a free Internet-based system that allows enrolled employers to confirm the legal status of new hires and is currently used by more than 69,000 employers in the United States.

The Executive Order is aimed at cracking down on hiring of illegal immigrants, but could also identify individuals with expired visas or who lack work permits.   In a June 9, 2008, news conference, Chertoff said, "The federal government should lead by example," and was, therefore, getting its own house in order.  The Executive Order would affect hundreds of thousands of workers, at the least, and potentially millions, Chertoff said.

Agencies responsible for federal acquisition regulations have sent a Notice of Proposed Rulemaking to the Federal Register to solicit public comment on proposed changes to the regulations.  Comments will be accepted for 60 days.  However, a final rule change should not be expected for six months or more.   Baker & Daniels will continue to keep you posted with any further developments.

In the interim, the Executive Order raises three areas of concern for federal government contractors.  First, while the Executive Order requires federal contractors to use E-Verify for new and existing employees, the current Memorandum of Understanding the DHS requires all E-Verify users to sign only allows for employment eligibility verification of new hires and not existing employees.  Accordingly, the Memorandum of Understanding will need to be revised to provide for verification of existing employees or the final rule will need to provide guidance on this issue.

Second, the State of Illinois has passed a law-Section 12(a) of the Illinois Right to Privacy
in the Workplace Act-that would effectively prohibit employers in the state from enrolling in E-Verify.  The DHS has sued the State of Illinois to enjoin it from implementing this law, which was scheduled to take effect on January 1, 2008.  The state has agreed not to enforce the law until the lawsuit is resolved.  However, should Illinois prevail and begin enforcing the new law, federal contractors with Illinois employees would be effectively banned from participating in federal government contracts.

Third, the E-Verify system has inherent shortcomings and complications.  For example, E-Verify prohibits an employee from submitting certain acceptable documents, which could lead to discrimination charges.  In addition, the database does not include all naturalization data, which will cause mismatches of naturalized citizens.  The system also is unable to detect when an employee has provided a stolen genuine document.  Navigating these issues will result in an increased burden on already heavily regulated federal government contractors.